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SEPTEMBER 11, 1978

Printed for the use of the
Colnml.ttee on Banking, Housing, and Urban Affairs

33-679 0


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WILLIAM PROXMIRE, Wisconsin, Ollairman
EDWARD W. BROOKE, Massachusetts
THOMAS J. McINTYRE, New Hampshire
H. JOHN HEINZ III, Pennsylvania
ROBERT !IIORGAN, North Carolina
KENNETH A. MCLEAN, Stall Director


BUCKLEY, Minorit11 Sta!J Director
STEVEN M. ROBERTS, Chief Economist
JOHN T. COLLINS, Special Counsel to the Minorit11

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Opening statement of Senator Proxmire _______________________________ _
Statement of Senator Sparkman ______________________________________ _
Statement of Senator Bayh ___________________________________________ _
Statement of Senator Sarbanes _______________________________________ _
Article from the Wall Street JournaL _________________________________ _
Statement for completion by Presidential nominee _____________________ _
Honors and awards ______________________________________________ _
Publications _______________ ___________________ __________________ _
Services--------------------------------------------------------Qualiflca tions _____________________________________________________ _
Mrs. Nancy Teeters answers to additional
questions submitted by Senator Proxmire ____________________________ _

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W(J,/Jhington, D.O.
The committee met at 10 :05 a.m. in room 5302, Dirksen Senate Office
Building, Senator William Proxmire, chairman of the committee,
Present: Senators Proxmire, Sparkman, and Sarbanes.
Also present: Senator Birch Bayh.
The CHAIRMAN. The committee will come to order.
We are honored this morning to have as our witness a nominee
for the Federal Reserve Board, a distinguished nominee.
Mrs. Teeters, will you stand and raise your right hand i Do you
swear the testimony you are about to give will be the truth, the whole
truth, and nothing but the truth~
Mrs. TEETERS. I do.
The CHAIRMAN. Be seated.

The CHAIRl\L\X. As you know, this is not only a highly prestigious
hut a very powerful and vital position on the Federal Reserve Board.
I have been concerned for some time about the fact that Presidents
have not appointed, in my judgment, people who arc qualified, who
really understood monetary policy, had a track record in monetary
policy, had experience in monetary policy, understood the economy,
had a basis on which we could judge their record.
There's no question that you have a remarkable background as an
economist, that your background in the academic areas is very clear
nnd very impressive. You also have background in workin1r with the
Government, including the Federal Reserve Board, which is most
encouraging. You spent several years there in positions of considerable
authority and responsibility and discharged those positions. Also, I'm
delighted to say as a Senator, you have worked for the Congress of
the United States at some length and there again yon distinguished
yourself by your knowledge of economic policy. We have a number
of questions for you on economic policy.
We are looking forward to this hearing and I want to commend
President Carter on appointing a very distinguished economist to the
Federal Reserve Board. Nobody is perfect, not even Dr. Teeters. You
don't have a banking or business background, but you do have a very
strong background in economics and government and monetary policy
and that's the most pertinent of all.
Mrs. TEETERS. Thank you.
The CHAIRMAN. Senator Sparkman.

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Senator SPARKMAN. Mr. Chairman, I listened to what you had to
say. I haven't had an opportunitv to read all of this statement we have
before us, but I certainly agree that what I've seen does show that
Mrs. Teeters had a wonderful record of performance.
The CHAmMAN. Now we are happy to see our distinguished colleague from Indiana here this morning and I notice that you did
come from Indiana. I challenged Birch on that. I didn't understand
that you were an Indiana native, but I see you are, that you went to
Horace Mann Elementary School in Marion, Ind., and Martin Boots
Junior High in Marion, and I can see why Marion and Senator Bayh
are so proud of your background. You also went to Marion High
School and graduated from Marion, so you are a Hoosier.
Mrs. TEETERS. That's right.
The CHAIRMAN. I'll be happy to have the distinguished senior
Hoosier introduce you, Senator Bayh.

Senator BAYH. Thank you, Mr. Chairman. I trust that the record
will not show the surprised expression on the chairman's face. I don't
know whether that was because he was comparing the Indiana origin
with the significant background of academic and governmental expertise. I'm sure that's not the case. l\Ir. Chairman, you have important matters to discuss with the new nominee, but I did want to have
a chance to say how proud I am of the fact that the President has
chosen Dr. Nancy Teeters to serve in this critical role.
Both you and I have been critical of the past performance of certain members of the Board, not as individuals but because of the dramatic impact that the activities of those individuals have on the entire
economic well-being of the country. I think we have in Dr. Teeters an
individual with a rare combination of experiences-with the Board,
with the Office of Management and Budget, in the private sector with
Brookings ,~here she coauthored the series of studies which were exceptional. And as you pointed out quite accurately, the outstanding
job she's done in the House.
I think t_hat we in Congress are really making history with the way
we are trymg to make our budgetary process work. It's our loss and
the country's gain to lose someone like Dr. Teeters from the congressional budgetary process, but indeed the country needs someone with
her talent on the Federal Reserve Board.
I might just add one other thought that I find particularly rewarding. As you know, I have been rather actively involved in a number of
different issues as far as the needs of women of our country and I think
it is a particularly impressive feature of the President's choice that he
chose Dr. Teeters as the first woman in the 65-year history of the Federal Reserve Board. Normally that's not the kind of thing that would
bear.even mentioning, but the fact that there's never been a woman
there before I think it should be mentioned. I think she's a good example of the fact that there are a number of women in this country who
have the credentials to do the job; they just happen to be women as
well; and I think the President has chosen a good person, a good, qualiDigitized by


fled person. She can serve as a shining example to this administration
and others that there are other people out there with her qualifications
to be used in other places as we 11.
So !•appreciate the privilege of ,t he honor of joining in the welcoming of Dr. Teeters to the committee.
The CHAIRMAN. Thank you, Senator Bayh, and I'm also delighted
that you mentioned the fine association that Dr. Teeters had with
Brookings and the great work she did there. It was most impressive.
As you say, the fact is that this is the first woman who's been appointed to the Federal Reserve Board and it's about time. The Federal
Reserve Board has been in existence since 1913. That's 65 years, and
it's a disgrace really that we haven't had a woman appointed to the
Board, particularly when there are women who are qualified. Now we
have a brilliantly qualified woman so it's doubly welcomed. Thank
you very much.
Senator SPARKl\IAX. Mr. Chairman, before Dr. Teeters leaves, I
would like to saf that I now have had an opportunity to look through
this paper that has ·been presented to us. I think she's had a wonderful
record, just almost unbelievable in her accomplishments, and I want
to congratulate her and join you in congratulating the President on
designating her to this office of high responsibility.
The CHAIRMAN. Thank you, Senator Sparkman.
Mrs. Teeters, do you or any of your immediate family have any
holdings that would constitute a potential conflict of interest in your
new position?
Mrs. TEETERS. In the children's trust funds there are bonds issued
by the Chemical Bank of New York which we have agreed to sell.
The CHAIRMAN. That's the only holding that you have that could
be a conflict of interest?
Mrs. TEETERS. There's also American Express stock in one trust fund
that we also agreed to sell. Those are the only conflicts of interest that
The CHAIRMAN. You have no other conflict of interest?
Mrs. TEETERS. Not according to the counsel of the Board. No. there's
one other, a small one. '\Ve own fonr shares of the Newfound Corp .•
a land operation in the Virgin Islands. which we have also agreed
to sell.
The CHAIRMAN. Why would that constitute a conflict of interest in
the Federal Reserve Board, a land holding in the Virgin Islands? It
seems to be remote from anything you could possibly influence.
Mrs. TEETERS. I have been asked to sell the stock because it's considered a speculative stock.
The CHAIRMAN. I see. Well, you're bending over backward. which
is always welcome.
Do you agree to appear before appropriate congressional committees to testify when requested to do so?
Mrs. TEETERS. Yes. sir.
The CHAIRMAN. Now there were a series of interesting editorials
and 80 forth in the '\Vall Street Journal this morning that relate to your
new iob, and I'd like to a8k you about some of them becau8e they
are rig-ht on target with what yon will have to <leal with.
In the first place. the economy as a whole and the problem of dealing with inflation and unemployment so puzzles everybody and we
don't seem to have any good answers. Daniel Brill, Assistant Secre-

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tary of Treasury for Economic Policy-and I'm sure you're familiar
with Mr. Brill-said the following, and I'd like your comment on it:
The analytical frameworks have not kept pace with the changing economic
environment, particularly in light of·the rapid social and structural changes that
have occurred in recent years. It is certainly a fact that some of our generally
accepted propositions in economics have been placed on the injured reserve list,
whether permanently or temporarily remains to be seen. This is not making the
economic policy task any easier. It is difficult enough to chart a policy course
without finding that some of the road signs are pointing in unexpected directions.

l\Ir. Brill points out, for instance, that the basic relationship betwe.en
real economic growth and unemployment has gone awry in the past
year or so, with the jobless rate falling sharply, even though the economy has grown only a bit faster than its long-term potential. This
development seems to have invalidated "Okun's law"-which I'm
sure you're familiar with-that says a growth rate of about 4 percent
is required to keep unemployment from rising and an additional percentage point of growth is needed to reduce the jobless rate by onethird of a point.
What's your reaction to this very puzzling development that we
have, plus the very difficult problem we have of coping with inflation
when we still have a high level of unemployment j
Mrs. TEETERS. Frankly, Senator, I'm willing to wait a couple years
to take a look at the statistics. Frequently we have an inconsistent set
of relationships which tend to disappear after all the information is
fully available. Okun's law has over time proven to be fairly a.ccurate
and looking back just in the field of the economy, I suspect that we are
going to find it was growing faster than we thought it was at the time
of the preliminary estimates of growth. I do find it both heartening
and puzzling that we have had such a rapid increase in employment
over the past 6 to 9 months. Of course, there is the other side, that at
least at the present time, the statistics are very low estimates
of productivity. So I have a feeling that the economy probably is progressing at a faster rate than the official statistics of growth are currently showing, and I think that's a long-range problem in information gathering.
However, I think Dan Brill is right that we have a number of-The CHAIRl\lAN. You say you think that the economy is growing at
a faster rate than the statistics show?
Mrs. TEETERS. Yes.
The CHAIRMAN. How much faster?
Mrs. TEETERS. I would guess about half a percentage point.
The CHAIRMAN. How can that be? Why should the statistics be
Mrs. TEETERS. They are all "preliminary" statistics at the present
time. Final numbers are not available until 3 years after the actual
event; with seasonal ad.instment and other factors, a very different
picture of the economy will often emerge.
The CHAIRl\IAN. EvE'n with the half a percent greater increase in
the last vear, that wouldn't validate Oknn's law, would it?
Mrs. TEETERS. I think Mr. Brill was saying currently reported statistics invalidates Oknn's law.
The CHAIRllIAN. Yes; he says it's invalidated under present circumstances. You explained that by saying the statistics underestimate the

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growth rate, but the growth rate of one-half percent more would not
give you a sufficient record so that you could justify the increase in
the employment based on Okun's law.
Mrs. TEETERS. That's right. It doesn't validate Okun's law, nor doe::;
it throw it completely out. I think there has been extremely rapid
growth in employment and, don't forget, we also moved theThe CHAIRMAN. How about the fact that we have such a diminish•
ing- rate of productivity 1
Mrs. TEETERS. Well, I think all of these are acting together. If the
GNP statistics are wrong and there has been this rapid increase in
employment, then there will be a low productivity number. On the
other hand, if there is a higher GNP number and the employment
numbers are not revised, the result will be more productivity·than had
been expected.
The CHAIBMAN. You sound as if-and I'm sure with your background it's very impressive-you sound less certain about the validity
of our statistics than any witness I have heard in some time.
Mrs. TEETERS. I think it takes a great deal of constant monitoring
of the statistics, and frankly I think we could do a great deal to improve them.
The CHAIRl\IAN. Do you think productivity statistics, the growth
statistics, and the employment statistics, could vary substantially?
Mrs. TEETERS. They are linked together, with one being a result of
the other. The productivity comes by taking real GNP and dividing
it by the number of people employed. So if one of those two numbers
is off, then .productivity is going to be off.
A good example of the statistical problem occurred last year in
1977. The unemployment rate in 1977 fluctuated between 6.9 anq 7.1
percent. It sort of bounced back and forth. ,vhen a seasonal adJustnwnt was made in December, we found there was a constantly declining unemployment rate during the paBt year; and a different view of
the 1977 economy emerged. I think Mr. Brill is right that many of
our theories don't fit any more and I would say one of the biggest
<'hanp:es, which is hard for the American public to comprehend on an
individual basis. is the exposure that the country now has to the fluctuations in the international world. During the three decades after
World ,var II, we didn't have to pay attention to the rest of the
world with regard to exchange rate; now we do; international relations have a lot to do with the domestic economy now.
The CHAIRMAN. Let me ask yon about the inflation problem. Inflation
does seem to be the No. 1 economic problem. The forecast by the Gove>rnment forecasters has been way off. They have been much too optimistic, particularly this year. It seems to be getting worse, regardless
of the steps being taken by the Federal Reserve, the administration,
or the Congress. Many people look to the Federal Reserve Board to
control inflation by restraining money growth and raising interest
rates. Interest rates are now at a level that will have a punishing effect
on housing and that will have> a retarding e>ffect on the growth of the
rest of the economy.
So, given the current economic conditions, what can and should the
Federal Reserve Board do to dampen inflation without bringing the
economy to a halt or slowing down the growth to such an extent that
unemployment increases?
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Mrs. TEETERS. Well, the Federa1 Reserve has taken some moves in
recent weeks which I think should help. It has removed the reserve
requirements on foreign lending to encourage domestic borrowers to
borrow in the Eurodollar market. This should help the pressure on
credit domestic markets and absorb Enrodol1ars from the international
market. That move is aimed at trying to move borrowing abroad rather
than at home.
The Fed has raised the discount rate, as you are well aware, and
apparently has raised their target on the Federal funds rate. Theoretical1y, this shou]d reduce the amonnt of borrowing.
The CHAIRMAX. The rediscount and the Federal funds rate are getting pretty high and the mortgage rate is about as close to 10 percent
as you can get without getting to it. Aren't we now in a zone where
almost any increase from now on is likely to slow construction, slow
housing, slow the economy i
Mrs. TEETERS. I would certainly say that the range that's available
for Federal Reserve action is very narrow because the rates are now
so high. I would be worried about higher rates at the present time.
Fortunately, the housing market seems to be holding up relatively
well with the introduction of the new T-bill and funds continue to
flow into the saving and loan associations. As a result, there's no sharp
indication of disintermediation.
The CHAIRMAN. ·what you're telling me is that the Federal Reserve,
which many people feel is our best rPliance or our one fairly consistent
reliance on fighting inflation, has very little it can do. You say it can
do something but the ranges which it can increase interest rates to
retard inflationary pressure is now pretty limited.
Mrs. TEETERS. It's certain1y more limited than it was at the beginning of the year.
The C1IAIRlL\N. It's so limited that the effect would be pretty
marginal. Inflation continues to be, as I said, the No. 1 economic
problem in the view of most people.
lfrs. TEETERS. I don:t think, Senator, that the higher-interest rates
have been in effect long enough to know what the impact is going to
he. The FPd has moved owr the vcar to raise the interest rates, which
are now relatively high. It is still too soon to get any reading on the
impact of those interest rates on the economy. Certainly to date-The CnAIRlIAN. You say we could have a fairly substantial increase in interest rates possibly without adverse effect on economic
Mrs. TEETERS. No, sir; I did not say that. I'm saving that at the
beginning of the year when the rates were a great deal lower, the Fed
had a much larger margin in which they could operate. Part of that
margin has been taken up, because we are now at a point where interest rates are very high. ·we still have not had a long enough period
of time to assess the impact of the new higher rates on the rate of
economic growth.
The CHAIRMAN. I will be back with more questions.
Senator Sparkman.
Senator SPARKMAN. I belien~ I'll yield since Senator Sarbanes is
Senator SARBANES. Mr. Chairman, I have no questions. I really
came this morning to state to the committee and place on the public
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record that I think this is an absolutely superb appointment. I was
on Walter Heller's staff at the Council of Economic Advisers when
Nancy Teeters came over from the Federal Reserve, where she was
a distinguished member of the Fed's staff to be a staff member of
the Council of Economic Advisers. I can attest personally to the
important role which she played at the Council and the extraordinary
quality of her work. She then went back to the Fed and from there
to the Office of Management and Budget and then to the Brookings
ilnstitution and the Library of Congress Congressional Research
Service. For the last few years she's been one of a handful of top
staff members of the House Budget Committee.
She is superbly qualified to be a member of the Federal Reserve
Board. I have just come this morning to be in a position at the right
time to move her favorable recommendation by the committee.
Having said that, I will yield the rest of my time to the chairman
so he can continue his interrogation.
The CHAIRMAN. You obviously have some fast friends on the
committee and it's always a good thing to have.
As you know, the Federal Reserve in their discussion of monetary
policy with the Congress announce target ranges for the monetary
aggregates, M1, M2 and M3 • We worked that out with Chairman Burns
a couple years ago and there are several aspects of that that bother
me very much.
One is the breadth of the ranges. When we first contemplated this I
very much wanted a specific figure. I pointed to the German Bundesbank which this year had an 8-percent target for the rate of increase
in the money supply in M1 and I wanted us to have something like one
figure so that we could make an evaluation of it.
The Federal Reserve has come in with ranges so 'broad that they
are very nearly meaningless. They go all the way from 4 percent to
6½ now. They are even having trouble with that. There's a minority
vote to push it up higher than that. In spite of that range, the Federal
Reserve seems to have trouble staying within that range. They have
gone above it rather consistently. The M1 is 4 to 6½ percent, yet there
is almost no chance that 4-percent growth could be achieved this year.
Similarly, there is little chance that M2 growth of 6 percent can or
should be reached. The target ranges if they are to be useful should
be meaningful.
I understand there's a psychological problem here if they should
abandon the 4 percent and move it from 6 to 9 percent or something
of that kind, which would be more realistic; then the feeling would be
that the Federal Reserve is throwing in the sponge in the fight against
Do you think the money growth ranges the Fed announced are useful
and meaningful representations of Fed monetary policy i
Mrs. TEETERS. Senator Proxmire, I'm not a monetarist either philosophically or by training. I think that the money ranges have been
helpful, but I think that they are only one of a variety of indicators
that anyone interested in monetary policy and the progress of the economy should look at. I have some sympathy with the Fed's range.
In fact, I'm almost envious of them-from my role as a forecaster of
the House. If I would have been able to give the range of growth in a
specific number--

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The CHAIRMAN. That's exactly the point. That's what I'm getting at.
If nothing else, you say give us a range so the deficit will be anything
from $40 to $60 billion, which is equivalent to this thing, or the
growth in the economy would be anything from 2 percent to 6 percent.
You know, when you get something like that, you don't have anything
to work with, and I realize if they give a specific figure they are not
going to be right; they are going to be above it or below it in most
cases; but at least we have some notion of what they are aiming at.
Now they just come in with a broad range that means very little.
Mrs. TEETERS. As a matter of fact, the estimates on the deficits for
the past 4 years have been remarkably wrong because of the shortfall
problems with expenditures that we have been coping with.
The CHAIRMAN. You have had lesser deficit than you estimated.
Mrs. TEETERS. That's absolutely right, by $10 to $15 billion from
time to time. Any time you give a point estimate for the future, you
know automatically it's going to be wrong; and whether you openly
say you have a range or whether you implicitly have it, it's a range
around which you think that your estimate is probably the midpoint
of that range. If anybody takes a point estimate as being what's
going to happen in the world over the future, I would say that they
arc not aware of reality.
I know the ranges are large and, realistically, if you're going to
talk about where you think the economy is going to go, those numbers
should be given ranges as well. However, the size of the range possibly
could be narrower. Given the publicity that the press gives to aberrations of M 1 from a certain range of growth, there's too much attention
focused, I think. on the rate of growth in M 1 , in particular, in very
f'hort periods of time.
The CHAIRMAN. ·well, you're not a monetarist. The monetarists
say that's the whole ballgame. They are very distinguished people,
including Nobel Prize winner Friedman and others, who say that's
the ballgame. How do you answer the argument that after all prices
are a relationship between the quantity of money and the quantity
of goods? If you increase the quantity of money, the value of that
money is likely to decline. If the quantity of money goes down in
relationship to the availability of goods, then the price level would
tend to go down too.
Mrs. TEETERS. Well, I think their track record has not been good
over the years, and another variable even in their own equation is the
rate of turnover in money.
The CHAIRMAN. Isn't 'it a matter of lag, though? Friedman argues
if you do it over a period of time that it would work out. Sometimes
the monetarists' view can be pretty cntel, and the effect on the economy
can be pretty devastating. If, for example, we followed what Friedman
seems to want to do, let the money supply increase, say, at a 3-pereent
or 31/2-percent rate regardless. would you agree or would you disagree
that you might get price stability but at a terrible price? That is a big
increase in unemployment then..
Mrs. TEETERS. I think the price may be too high. It seems to me that
the major goals of someone working in the policy area have to be aimed
at what you want in the economy. Certainly excessive money can lead
to inflation; on the other hand, too little money can cut down on the
rate of real growth and lead to more unemployment. So you're con-

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stantly balancing one off against the other. I don't think we have had
rates of growth in the money supply. with maybe a few exceptional
periods, in which the money supply has been the major cause of the
inflation. The inflation has been coming rather steadily out of other
areas and-The CHAIRMAN. Would you argue that the inflation that we hav~
had in the last 2, 3, or 4 years has not been in any significant part a
function of the increase in the supply of money 1
Mrs. TEETERS. I think it was coming from sources such as food
prices, fuel prices, decreases in the Yalue of the dollar~ and increases in
The CHAIRMAN. But what Friedman says seems to be true, that if
the price of energy would go up, regardless of what you do with
monetary policy, the price of other commodities would go down because you depress the economy, if you held down the rate of increase
in the supply of money. In other words. there would be a tradeoff.
There would be a drop in the price of other things. People wouldn't
be able to afford to buy cars and other things, and that would compensate overall for what would happen to the increase in the price
of energy.
Mrs. TEETERS. But there would also be a very large increase in the
rate of unemployment.
Mrs. 'rEETI:RS. If you force the oil prices to be absorbed within a
given framework, it means there are other goods that are not going to
be purchased and lots of jobs would be lost. I happen to think that
unempl<>yment and employment are important goals in our society.
The CHAIRMAN. I agree with that wholeheartedly, but I'm saying
that doesn't go to the integrity of the monetarists' argument which is
that the heart of it is the relationship between the increase in the
money supply and the price level. If you follow their policy. thev will
get price stability, but you would say the cost of that price stability is
so great that you wouldn't want to pay it 1
Mrs. TEETERS. I think the cost would be extraordinarily expensive.
I am sure that there are other factors operating in the inflation situation which probably would escalate prices even if you followed a
strict monetarist approach to the world. OPEC is not under our control. The food shortages have escalated food µrices very ranidly. We
have an economy which is heavily organized as far as union wages
are concerned, and we have industries which have the ability to set
their own prices. So a simple approach of money alone does not tak~
into account the complex world that we live in.
The CHAIRMAN. Then if we are going to go along with the recognition that we need a substantiial increase in the money supply, M1 has to
go up at a rate of 7 or s·percent, are we then recognizing that we _will
have to have a rather steady increase in price level over the next 20
Mrs. TEETF..RS. I think it is very important how the reported effort of
the White House to keep the most recent increases in prices out of
industry wa~ settlements is resolved. We have had a situation where
one sector of the economy has gained at the expense of other sectors.
In the early 1970's, it was the agricultural sector. People want to maintnin their real income, and we are fighting back and forth to cut a pie

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which is not growing as fast in real terms as people want it to. Each
one is trying to maintain their relative advantage compared to other
people. )Ve don't have a system or a mechanism which says basically
that all of us have to take a smaller growth in our real income, and
somehow we have to find a way of dividing up thif pie without competing segments of our economy trying constantly to recoup.
The CHAIRMAN. I agree with that wholeheartedly, but wage increases have been translated into price increases. The question 1s not
if that's a fact, but what you are going to do about it. It's perfectly
understandable on the part of labor that they want a cost-of-living
adjustment, and they are getting it. In more and more contracts it's
automatic. The only way you can break that probably, to be blunt
about it----and I wouldn't want to do it--but isn't it true that the only
way you can break that is by a tight monetary policy, among other
things, that pushes us into something of a recession, increased unemployment, weakens the ability of labor to get what they would like to
get and therefore tends to correct our inflation by creating a situation
where wages don't go up as fast?
Mrs. TEETERS. I'm not aware that the recent recession in 1974 and 1975
really broke the wage negotiation power of the unions, nor did it
prevent the large companies from going forward with increased prices.
The steel industry had a rapid increase in both prices and wages over
this period of time.
The CHAmMAN. Did they repeal the law of supply and demand?
They had labor available there looking for work, anct yet wages you
say went up just as fast-Mrs. TEETERS. I think the people who get hit worst by recession are
not the ones protected by the unions. When you come to the laws of
supply and demand, you have to take into account the productive
The CnAmMAN. Of course, you're absolutely right, but 80 percent of
the people in this country don't belong to unions, but wages would tend
to fluctuate.
. Mrs. TEETERS. There was no downward fluctuation in wages in the
past 4 or 5 years. The last downward movement in wages was in the
Depression period in the 1930's.
The CHAraMAN. Did they go up as fast in a period of recession?
~frs. TEETF.-RS. They probably went up somewhat slower but not a
great deal slower. Remember that the 1975 recession occurred after the
enormous double-digit inflation of 1974-75. Given the 11-percent increase in the CPI, I think there was a great deal of fear that the unions
would ask for increased wages of 13 percent. In reality, wage increases
avemged about 8 percent.
The CHAmMAN. What is your conclusion as to the level of inflation
we are likely to have to face?
Mrs. TEETERS. I think we have built in a lot of inflation. It's getting
into wage contracts. I think the way to reduce it is to slowly push down
on the level of the rate of increase in wages and prices from what
it was previously.
The CHAffiMAN. Can you just do that when you have what we all
hope to have, a diminishing level of unemployment or holding unemployment, say, at 5½ or 6 percent moving down to 5~ We all would
like, including the President and the overwhelming majority of Congress, to reduce unemployment. We realize it's too high.

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Mrs. TEETERS. I agree, and I also do not think the inflation is coming
from shortages of labor or capital. So it seems to me you could still
move to absorb the excess industrial capacity and lower the unemplo1,ment rate without that being a source of increased inflation. We still
have some margin on the eroduct side and we certainly have a margin
on the labor side. There will come a point at which we do begin to have
a shortage of labor and reach a high level of capacity utilization; then
you could'expect inflation in that area. I think we are not in that range
at the present time.
The CHAIRMAN. We have had this gentle but determined effort on
the part of the President and on the part of the people around him to
try to persuade labor to do this. What is there now that can persuade
them to do iH The Wall Street Journal-and I quote it again-says
Joumal reporters Richard Levine and Urhan Lehner wrote in this paper
Friday about ideas being cooked up in the White House for a second phase of
the battle against inflation. Announcement of a plan is possible in a matter of
weeks. Under this plan, the second phase would consist of voluntary wage and
price guidelines, backed by limited sanctions. Wages, for example, would be
allowed to rise no faster than the consumer price index, evidently meaning no
one gets a raise at all but must pay higher taxes as inflation Jacks him up through
the progressive income tax schedule. Price guidelines would vary from industry
to industry, depending on bow fast prices for particular products have been
rising in the past. All of this would be enforced through various slings and
arrow~racking down on regulated industries, yanking federal contracts from
wayward employers, ending special import protections and so on. Exceptions
to the general rules could be won by properly courting the appropriate federal

Now that's the Wall Street Journal philosophy. Nevertheless, there
is a certain kernel of reality there.
Are you advocating that they move to this kind of semicontrolled
situation where vou use various Federal sanctions-contracts and so
forth-to crack down on employers who raise their wages or who increase prices~
Mrs. TEETERS. Senator, I have not seen the plan. However, I. along
with many other people, am deeply disappointed that there has not
been voluntary compliance with the lltlidelines set up by the President.
The CHAIRMAN. So where do we go~
Mrs. TEETERS. I don't know where we f!O. There's a book titled "Exhortation and Controls" which is a history of wage and price controls
in this country since the beginning of World War II. It's a fascinating
book to read. It's also a very discouraging book to read, because we
have tried so many different things, so many different times, to control
the rate of inflation.
As I said, next year we have major wage nef!otiations coming up. If
we could. in some wav, convince the nei?otiators that thev have a maior
role to plav in reducing the rate of inflation in this country, we would
a11 be much better off. However. we don't have a carrot or a stick.
Under present Jaw, we don't have any way to brinf! this cooperation
The CHAIRMAX. Let me ask vou about two remedies that. have been
proposed. The, second one I'm 'going to ask about is the big one that
many people think is the answer. The first is the more subtle one that
many economists seem to applaud. That's TIP (tax-hasecl incomes policy). '\Ve have had hearings before this committee on it. incentives in

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the tax law to persuade unions to hold down wage demands and persuade employers to hold down settlements and also price increases.
What do you'think of those 1
Mrs. TEETERS. Well, my initial reaction to TIP is that it would be almost as hard to administer as wage and price controls. It means that
you really have to get back into the questions of what is productivity,
how to define jobs, and what is a wage increase.
The CHAIRMAN. Have you discusssd this with Arthur Okun@
Mrs. TEETERS. Oh, yes, frequently.
The CHAIRMAN. And Henry Wallich i
Mrs. TEETERS. Yes; as you probably know, Brookings had a conference on TIP last fall. I think that the major reservation is the administrath·e problem, and it is large. As time goes on, TIP becomes more
attractive, particularly if you could somehow limit it with price
restrictions to the large unions and to the lar~e manufacturers. A
program doesn't have to be universal to work, Just like wage settlements don't have to be universal to be the ones that are followed by
the nonwage sector of the economy.
So if other things fall by the wayside, TIP becomes the only thing
we haven't tried over the years, it becomes much more attractive.
The CnAIRl\IAN. It seems like the only game in town. Leonard Silk
in an article in the New York Times-he's a very able and br:ight
commentator-he indicated that we ought to try it; that's the only
thing left. ,ve are working very hard on this committee. We have
been working with the various economists on it and we expect to have
something we can offer as an amendment on the floor.
e are not
going to press it this year, but we think it ought to be debated and discussed and that it has possibility.
Mrs. TEETERS. As I say, it has enormous administrative problems.
The CHAIRMAN. Isn't there any way you can simplify it? Why
;;hould it be so hard to have a tax law that simply provides a reward
for holding your price level below what it was last year, that you can
reduce your taxes 1
Mrs. TEETERS. You're going to have problems deciding what the
price is and proving that you held it below last year's level and which
prices yon held below. It seems to me that TIP has all the inherent
problems that you run into with wage and price controls. There is a
substantial burden of proof which apparently would fall on the IRS.
The one adrnntage of TIP over wage and price controls, although it
has all the administrative problems of wage and price controls, is
that it doesn't distort the wage and price mechanism of the economy.
I have another problem with TIP. I'm reluctant to use the tax system
for that type of economic policy. ·we\·e got so much loaded into the
tax system now that this is just another distortion of the basic code.
However, if it's a way to get at the inflationary problem, I certainly
would he willing to try it.
The CHAIRMAN. I share all that reluctance with you very much. We
do have much too complicated a tax code.
The other point, of course, is Government spending, the argument
that we have enormously increased Government spending- over the
l:ist few years. Even with a percentage of a growing GNP in an inflated economy it's gone from 18 percent to 20 percent-that is Federal
!"pending as a percentage of GNP, and of course local and State spending-prodded to some extent by Federal policies has increased.


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There's a taxpayer revolt developing in the country and there's a
feeling on the part of many, many people that this is a big element in
inflation, particularly spendin~ in the defense area and other areas
that are sterile and don't provide any economic good for the amount
of expenditure that is made.
How do you feel with that as an element?
Mrs. TEETERS. Well, I think there are a number of things going on
in the Government spending area. Part of the rise in sepnding in the
past couple years has been in response to the 1974-75 recessionCETA, public works, countercyclical revenue sharing-there's a whole
group of programs that were developed as a fight against the recession. Many of these programs were triggered on the employment rate.
Unemployment compensation is responsive to the rate of unemploy•
ment. Part of the rise in the last few years has been purely antirecession and should disappear as the unemployment rate drops. The share
of GNP going to the Federal Government has been relatively stable
for 20 years. The big increase has been at the State and local level; it
has £?One from 7 percent GNP to about 15 percent, which was primarily for educational expenses associated with the baby boom. The
pressure for educations;} expenses at the local levels is disappearing.
There are empty schoolhouses now.
The CHAIRMAN. Maybe it should. We just passed an elementary and
secondary education bill which has colossal increases in expenditure at
the Federal level. We are diminishing it at the local level but we are
bpending more per capita based on any terms, and the momentum
~eems to be there and it's certainly not ~etting results. We had that
documentary on CBS the other night, "The Education Slagheap,"
showing that here we are spendin~ this enormous amount on education at every level and education is getting worse. The class size is
faJling every year and the functional illiteracy is increasing. It's an
appalling situation. But you feel that we can diminish the percentage
of our GNP going into education because of demographic features 1
Mrs. TEETERS. I think the demographic features have been very
important both in the quality of education and the amount we have
been spending for it. As the baby boom generation grows up-and
they are-I think you are going to find that there are literally fewer
children in the educational system over the next 10 to 15 years. Defense, incidentally, has been a relatively smaller share of GNP for
the past 10 years, with the exception of the Vietnam war. So that's not
the source of the growth in the Federal expenditures; it's coming
mainly in social -programs and the exapnsion of social security, medicare, and medicaid.
The CHAIRMAN. Senator Sparkman.
Senator SPARKMAN. Mr. Chairman, I'm going to have to be on the
floor to handle a matter at 11 o'clock so I'm goinl? to have to leave, but
before ,roing I'd like to ask just a couple of questions if I may.
Senator SPARKMAN. Am I correct in my feeling that the Federal
Reserve must maintain a certain level of flexibility 1
Mrs. TEETERS. The Federal Reserve, in the conduct of monetary
policy, is the most flexible economic instrument that we have because it
meets frequently, it can vote, and can change interest rates or targets
for money growth. Yes; it's very flexible.

U•579 0 • 78 • 3

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Senator SPARKMAN. Is it not so greatly concerned with such matters,
for instance, at the present time as the problem of unemployment as
against inflation ?
Mrs. TEETER$. I would assume that at the present time the inflation
problem seems to be more acute than the unemployment problem.
although if the Federal Reserve were not concerned about the unemployment I would be most surprised. I personally am concerned
with unemployment and employment as well as interest rates and
Senator SPARKMAN. Mr. Chairman, as I say, I must handle a matter
on the floor at 11 o'clock so I'm going to have to leave, but I would like
to give you my proxy to vote in favor of recommending Mrs. Teeters
for confirmation.
The CHAIIOIAN, Well, we will poll the committee today. I'm sure it
will be unanimous. There are no members opposed and I agree with
Senator Sarbanes that this is a superb appointment. I apologize for
taking this much time but we rarely have such an opportunity. The
Chairman of the Federal Reserve Board comes up before the committee
quite often, but the members don't, and of course you have a vote and
you're a very important member of the Federal Reserve. I will have to
leave in about 5 minutes because I have to be on the floor at 11 o'clock!
Let me just ask you this question. I might have time for one more.
For a long time the economic strategy of the country seems to have
been working toward tighter monetary policy and.looser fiscal policy.
That is, we seemed to be deepening our deficit and spending more, and
we seem to be following a policy of fighting inflation with monetary
policy and therefore higher interest rates. I have felt for a long time
that's exactly the revei:se policy-it ought to be a tight fiscal policy and
an easy monetary pohcy, that the economy would work best. on that
basis-low interest rates and relatively low Federal spending and balanced budgets and so forth. How do you feel about that¥ ·
Mrs. TEETERS. Well, the most recent deficits from 1974 on have been
heavily created. by the economy itself. They have reduced the revenues
because of low mcome growth. They have increased the 11nemployment
corqpensation and other programs in order to compensate for the
I think that the concept I would opt for, which I'm sure is familiar
to you, would be to have a positive full employment surplus and let
the action in the economy determine when the actual deficit is relative
to a slightly positive full employment surplus.
The CHAmMAN. The Federal Reserve releases the policy record of
actions taken by the Open Market Committee with about a 30-<!ay lag.
Many people believe that the decisions made at the Open Market Committee meeti~ should be .made public within ·a few days. after they
are made. Important decisions made by the Congress are debated in
public and released immediately. I ran see no reason.why the release
of the Open Market Committee policy record should be delayed. ·
Would you have any problem with havin,r the Open Market Com-·
mittee record of policy action released within a few days after eM:lh
Mrs. TE.En:as. I understand that there are·tecbnical problems w.ith
preparin1r the record of policy actions. Given the problems of pre-

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paring that record and ·having it ·renewecf by each membel" -on the
Federal Open Market Committiee, it takes a certain amount of time. I
think that the p ~ of technically preparing it· would have· to be
taken into C011S1deration in setting a tune liinit ffir the releaee of the
Federal Open Market Committee papers. .
· ·· ·
The CHAIRlliN. So it'sstrictlytechnicaU .You don't see any reason,
like the effect it might have on speculation·or the effe<t. it might have
on confidence t
· Mrs. 1'EETEBs. I don't. know, Senator Pronnire. ·I seen 1ihe
markets respond in an evel"-shortening period of tirne •from the time
of the.Federal Open Ma~ Committee heatings to ·the release of the
record of policy actions. I ~an con<Jeive of a problem •of ihforrne.tion
,: '
leaking out m the sense tMt,.;..;- :
The CHAIRM'.AN. Why shouldn't it-just be covered oompJie~ylThe
newspaper people tell me that covering the Fed is the most frustrating
secretive acti<m they have. It would -lie a gteat thing for the ·country
to understand monetary policy and one ~ason ·we don't ii so mU<'h of
it is conducted privately, secretly, and then the release oomes out
the fact and it's so long after the fact it's like a month-old newspaper.
Nobody cares.
· · · · .. ·
Mrs. TEETERS. Well, as I say, I think there are 1~me technical pro})lems: We have to have 12 people agree and acknowledge what they ·
· .·: · ' ·
·· •
have said. It's like making a transcript.
The CllAmMAN. We didn't use to·pennit &nybody in our ~xecutive
session of the House and Senate committees. Now we do and' we find
it doesn't make ariy difference: We all thought that woo.Id be' a. terrible
.. . , ·
· · :
' .
Mrs. 'ThETER.s. I approve of'the sunshine laws. But l' can see that if a
few people ~ special information, with the markets as sensitive ae
they are ancf with as much money flowing through them, there could
be problems. However, it seems to me that if everybody has all the
information and it is correctly edited to reflect the views and what
actually occurred, then the technical period of time for developing the
printed material would be the limiting factor.
The CHAIRHAN. Well, I hope you will work on that, and I hope you
can justify what you mean by technical. That does seem to me-I want
to be fair to you and I know you're being completely honest, but technically just seems to be sayi11g you don't have a good reason.
Mrs. 'l'EETERs. As far as I'm concerned, I meant it literally that way.
There are production problems of getting 12 people to look at it.
The CHAIRMAN. Why do they have to look at 1H We correct ours in
the Congressional Record but the press is there watching. They report
it at the same time we say it.
Mrs. TEETms. Some of my reservation comes from the enormous
preBB coverage and commentary on anything the Board does. There's a
great deal of pressure to make sure that what is being released is
absolutely accurate. I have edited transcripts. There are some very
funny things that can come from the spoken words. Spoken words
don't read like written words.
The CHAIRHAN. We have the chairman of the Federal Reserve Board
who's &n extraordinarily able and articulate man, and his predecessors the same, who come up here and off the cuff they talk about anytqing anywhere. You may have noticed the editorials in the Post the

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other day where they called him the talkative Mr. Miller. He's free to
talk any time, anywhere about anythin_g. But when the FED Board has
a meetmg, somehow they have·to study what they said and change it
and throw it out, delete it, add to it, and then we only see the edited
record 30 days later.
Well, thank you very much. I have a number of other questions I'd
like to ask for the record. [Seep. 29.]
Mrs. TEETmts. Certainly.
The CHAnuu.N. And } apologize for having to leave. As I said before
and as Senator Sarbanes has said, you're a splendid appointment. It's
a great credit to President Carter that he made it.
Senator SARBANES. Mr. Chairman, may I just make this observation 9
I think we have had an excellent discussion of economic policy this
morning. I think that's testimony to the quality of .the Chairman's
guestions and the quality of the nominee's answers and I think it's
oeen demonstrated clearly that Nancy Teet.ers is going to be a very
strong and positive force on the Federal Reserve Board. Perhaps the
committee ought to consider urging Chairman Miller to bring along
some of his Board members when he comes before the committee from
time to time.
The CHAnu.uN. I think that's an excellent suggestion. We don't get
them up here enough. There's a great deal of talent on that Board. Mr.
Coldwell and Mr. Jackson we have on very special things and occasionally Mr. Partee. Maybe we could get the other members.
Mrs. TE!:nms. I'd°be delighted to come.
The CHAmHAN. Very good. The committee will stand adjourned.
rWhereupon, at 11 a.m., the hearing was adjourned.]
[Additional material ordered inserted in the record follows:]

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TELEPHONE 202-224-7391

Procedures formally adopled by the U.S. Senate Committee on
Banking, Housing and Urban Affairs January 27, 1976, establish a
uniform questionnaire for all Presidential nominees whose confirmation hearings come before this Committee.
In addition, the procedures establish that:
(I) A confirmation bearing shall normally be held at least five
days after receipt of the completed questionnaire by the Committee
unless waived by a majority ,·ote of the Committee.
(2) The Committee shall ,·ote on the confirmation not less
than 24 hours after the Committee bas received transcripts or the
hearing unless "·ah·ed by unanimous consent.
(3) All nominees routinely shall testify under oath at their
confirmation hearings.
This questionnaire sl1all he made a part of the public record
except for financial information, "·hich shall ~e kept confidential.
Nominees are requested lo answer all questions, and to add
additional pages where necessary.

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Namr. _ _Te;eters ....
=n_ _ __
Putition to which


.;?, ~!,--,!?..J:O


Place of birth:

Dale of

August 28, 1978

Marlon. Indiana.,__ _ _ _ _ __

Marital status: ___&n-JecLiZ6..)TS...} Full name of spous,,:..JloberLO--leetel:$. _ _ __


of children: Ann Teeters

_ _ _ _ 18~y_r_s._ _ __
James Schendel Teeters 17....;;.y_rs_._ _ _ _ _ __

""JOh"""nL..D,. ru1...1<..e_Iuee~te..,r...,5.____ 14......y._e5..________




------------ Degrees

Martlnr,il'idia-na--Horace Mann Elemer:itary _
---,iia rnnr,-rnd i Vi
Martin Boots Jr . High
flla rfffir,1lfd I .fnaMari on High School
Oberlin, Ohl
Ober-lin College
Ann Ar-bor. H f c l i l ~
Univer-sity of Michigan
1952-1957 •

- received

Dates of








• Academic year 1955-56 .,as spent In Gennan~---Honors and aw:>rds: list below all scholarships. fella.-:shi~s. honorary dcizrees. rTlilitary me::!als. I"::-~~ ~~~.-:: A,: ie-ty
memberships• .:and any other special recognitions tor outstandint service;; or actucvt!m~nt.

See Schedu Je A

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Ust betow all memberships and offices held In prvlflllonal, fratfflllll, bull...._ ICholar1y,
civic, charitable and other orpnizations.

_ _ _ _o_,.-=-•niz:,tlon_ _ __


American Economic Association
t:nl"-tlst· Ave; -s;-;· Nashvflle, Tenn-:----- - -.American Finance Association
lt:"Y:11ntv:-;-i.radilate ·schoor. rr.r.c:-·
National Economists Clu~
Director, VP, Presizooo- N·s-CNW, D.C-. -ent,- Cii.iiniian
(;le_velaod. .Park_Clu.b__ ______ _ __ _ _ __ _ _ _
3433 33rd Pl. NW, 0. C.
Jns.tUute . for_ the. ..Study .nf. on .eo 11 CY.,-Howard University, 0. C.
Member of National
~h.OCY ..ioll:il...__

1974 - Present
- - - - - ---- 1971 - 1974
1968 - PrescnJ
----- - -1959.,.J>ruent


Employment record: Ust below all positions held since college, including the title or description of job, name of
employment, location of work, and dates of inclusive employment.

1951-53 Oberlin College. Obrll.J1,..Jllij"'-o_ _ _,Lva..,ruious


1954-55 Uni vers l..ty.LMI ~hi !1411 ,._ .Ecu.0D011J11111Juf.i;C.>.SJ0111e:i;pu;t_Jiue,oai,;cnblIJD:11,
...._ __
lliinlrrbor, H1clllgan
1955-56 ugJ:m~1$~e~~§~n<!_(Qy~IleAi.J, _ ___.I~o~st~ruuuc~t~or..._____

Unl ve_rs i J:yLM1 ch 1.9a I!, ~2.112!!!iil.J!"'e.,p.1,.t..._..1I.s:tacllC1oJbIJ1UJDlll9-f<JPOJ)u)c..ow..__ _
nn A"rbor, Micn1gan
1962-63 c~~~~~~~~_._s_____.r..,,,.oo'-"orollll.L1s..,t._____
Federal Reser e Board,
Wasli1ngton, . ··c
1966-70 OffJ~.Qf f-191....1,___B_®get.
Fl seal Ecooarnist
--Washington, o:-i:-:
1970-73 Bro9kings l.nstitution~
SeniarJ..e.l.lo1t. _ __
Washington,- ·o·.- C. .
l~3-75* Li t,irar_y J>CConsres s ,_ C.o ngressiona.L __ jg_!li _Q r..5~£.igj is t ___ _
Researc11 Service, i·Jashington, 0. C.
1975*- Present __ _ __
Ho·us-e of Representatives, Conmittee Assistant Oirector-:1957-66

_ _ _.;:O.:.:.n-'t.~


Budg~t_._Ha?h.!Eg_tQ_'h.__!} ;__C_., _

* On loan to HBC by Library for one year


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Chief_E~O.!J.O!l!ist ___ _


List any experience in or direct association with Federal, State, or local governments, in•
eluding any advisory, consultative, honorary or other part-time service or positions.

------ -- -----------• Refer_ bac:k_ t(Lemplo,LmeOk~ecord _______________
Part time consultant to the 1970_Advisory Council on
_ _s_o_ci_al Security_.___________________


List the titles. publishers and dates of books, articles. reports or other published materials
you have written.

See Schedule B

and activities:

list a:1 mi?mberships and offices held in or financi::tl contributions and services rendt-re~ to

all political parties or election committees during the last ten years.

ll.onati_PDs_: ..t.hf~kui9n.ed. JlMCY .Jt_Jeeters: ..McGovern. October 27 .• _121:
--Sl0 .00; Jee Fisher, August ,4, 1974 -- 525.00;

checks signed R. D. Teeters: People for Muskie, May 20, 1972 -- _$100.00; Mondale Volunteer Conmittee, September 1, 1972 --$25.00;
Sarbanes for Senate, December 20, 1975 --


See Schedule C

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State fully your qualifications to ser,e In the position to which you have been named.

See Schedule D
Future employment
l. Indicate whether you will sever all connections with your present employer, business
firm, association or organization if you are confirmed by the Senate.

-1=---------------2. As far as can be foreseen, state whether you have any plans after completing govern,
ment service to resume employment, affiliation or practice with your previous em•
ployer, business firm, association or organization.

- - - - - - --~Q._p,:e~e!lt . plans_or_cQllll!i tm.ents. _____
3 .. Has anybody made you a commitment to a job after you leave government?

4. Do you expect to serve the full term for which you have been appointed?

Yes, I expect to serve u~til my tenn. has expired.
Potential conflicts
of interest:

l. Describe any financial arrangements or deferred compensation agreements or other
continuinz dealings with business associates, clients or customers who will be af•

. fected by policies which you will influence in the position to which you have been

-------'S-'e-"e_an.~w_!r to que~_~ion =-2_,b,.,e,..,_1-"'ow,,___ _ _ _ _ _ _ __

------------------------------2. List any investments, obligations, liabilities, or other relationships which migh: ir.volve
potential conflicts of interest with the pqsition to which you have been nominated.

See Schedule E
Nancy Teeters, and her husband, Robert Teeters will take al) nece.s~ary
actions to eliminate conflicts arising


tl)t..!nlll-fllruls. enumerated

in Schedule E

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G cx,gIe

3. Describe any business relationship, daalln1 or financial transaction (other than tax•
paylnl) which you have had durin1 the last 10 years with the federal Government,
whether for yourself, on behalf of a client, or acting as an agent, that might In any
_way constitute or result In a possible conflict of lnterast with the position to which you
have been nominated.

See ques!Lemp.l.amen.t...1re:..a.c..oc..,d._.n..o,'--------

4. Ust any lobbying activity during the past 10 years in which you have enpged for the
purpose of directly or Indirectly Influencing the passage, defeat or modification of
any legislation at the national level of government or affecting the administration and,
execution of national law or public policy.

As assistant staff director. and .. chjefecoll0lllllLQLthe....CDl1111i.t.tee...
on · the Budget for the House of Rep.ce.s~ntatjyes. I have been
responsible for he l pi!!.!L...t~ute\'elOLthe...1wo._conrncceot cesolutioos
on the budget required bl(....]aw~Lhave provided staff s11pp0cLto...1lu!
Mem!l.l!.r:Ll.Qn!=erning __Jmwosed~g.islation-1.h.a.½ou.lci affect the



·- - --- ·· - - - - - -- -··-·· ·- - · -

5. Explain how you will resolve any potential conflict of interest that may be disclosed by
your reapon- to the above items.

I do not antjcjpate that my_Jw;kg.rnund


I 1nter£ec witb th .._

As indicated, I sbal 1 resign frm my

pecfQmoce of DlY. duties

work with the House Budget Conmittee.

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Schedule A
August 17, 1978

Nancy Hays Teeters
Honors and Awards

National Honorary Society (High School)


Kiwanis Award (top 10 graduating seniors)


Outstanding Senior Girl (High School)


Comfort Starr Award (economics), Oberlin College


Graduate Scholarship (economics), University of Michigan


Graduate Scholarship (economics), University of Michigan


Teaching Fellow (economics) , ·University of Michigan


Teaching Fellow (economics), Univj!rsity of Michigan


Outstanding Service Award, National Economists Club, Washington, O. C.

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Nancy Hays Teeters

Schedule B
August 17, 1978

"Federal, State, and Local Budgets," Methods and Technique& of Business Forecasting, William F. Butler, Robert A. kavesh, and Robert B. Platt, editors,
Prentice Hall, Inc.
Setting National Priorities: the 1974 Budget, with Edward R. Fried, Alice M.
Rivlin, and Charles L. Sdlultze, Brookings Institution, Washington, 0. C. (1973)
Setting National Priorities: the 1973 Budget, with Charles L. Schultze, Edward
R. Fried, and Alice H. Rivlin, Brookings Institution, Washington, 0. C.
"The 1973 Federal Budget," Brookings Papers on Economic Activity, Vol . I,
Brookings Institution, Washington, 0. C. (1972)
Setting National Priorities: the 1972 Budget, with Charles L. Schultze, Edward
R. Fried, and Alice H. Rivlin, Brookings lnstiution, Washington, O. C.
"Budgetary Outlook at Hid-Year," in Brookings Papers on Economic Activity, Brookings
Institution, Washington, 0. C.
"Payroll Tax for Social Security," in Broad Based Taxes: New Options and Sources,
Richard A. Musgrave, editor, Johns Hopkins University Press, Baltimore,
"Outlook for Federal Fiscal Policy," Brookings Papers on Economic Activity, Vol. 2
Brookings Institution, Washington, O. C.
"Built-in Flexibility of Federa 1 Expenditures," Brook i n{s Pa)ers on Economic
Activity, Brookings Institution, Washington, D. C.
"Report of the Panel of Actuaries and Economists to the Subcoi:n:1 i ttee on Gost
Estimates and Financial Policy of the Advisory Council on Social _S ecurity."
with Otto Eckstein, Arnol~ Ha,·t,er~("", 1-'urray Lati i:ier , ar.t :-:,,•:1P.ll ;.; ;11;.--., .. .
in ReP.orts . of t~e 1J71 ·- ~iv i sory Cqur-c i 1 on S0c i a 1 S~cur i-: ·:, :-:o~se ~ocu!.. i_, ~ . ~92-SO, 92nd Congress, 1,, Session (1971
"The Full Employment Surplus Revisited," .iith Arthur M. Okun , Grookinns Pa ~r.r~ c•1
Economic Activity, Brookings Institution, :-:cs·h~ ogtoc, D. C.;1970)

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Schedule C
August 17, 1978

Nancy- Hays Teeters
Technical advisor

for Democratic Platfonn Conmlttee

June 1976

Member Economic Advisory Conmlttee for President Carter

July - November

Technical advisor to McGovern


Carter Transition Staff

November 1976 January 1977

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Schedule D
August 17, 1978

Nancy. Hays Teeters
By training, I am an economist. I concentrated in economics both as an
undergraduate at Oberlin College and as a graduate student at the University
of Michigan with special emphasis on fiscal and monetary policy.
My entire professional career of twenty-one years to date has been as an
economist. From 1957 to 1966, I served as a staff economist in the Government
Finance Section of the Oivision of Research and Statistics of the Federal
Reserve Board. My responsibilities included such things as tracking the ownership of the Federal debt, estimating and interpreting Federal fiscal policy,
supervising the development of certain computer programs, and special studies,
such as the one on the fiscal impact of the social security system. In 1962,
I was loaned to the Council of Economic Advisers, and helped to develop the
tax reduction proposal which eventually was enacted into law in 1964.
From January of 1966 to January of 1970, I was an economist in the Fis ca 1
Analysis Division of the Bureau of the Budget (now the Office of Management
and Budget). During most of that time, I was the sole staff representative of
the Bureau to the Troika -- the three agency, three level group that developed
the official economic forecasts of the Government. I was also the staff liaison
person with the Council of Economic Advisers and the revenue estimators at the
Treasury . I was responsible for any economic discussion in the budget documents,
the revenue section, and one of the special analyses . In addition to the macrc- .
economic work, I participated in development of social security policy and t11c
unified budget.
From February 1970 to September 1973, I was on the staff of the Brookir;'.,s
Institution. During that period, I was promoted from a research associate t0
Since Brookings is a research institution. my work involv e'
extensive research and ><rit i ng on a variety of to pics in ·economics (see att ,, ···,:
list or publications, Schedule G). I ,,as also a men•bcr of the Brookings r ,,,· .

a senior fellow.

e n E.:.. :; ~11:dc Activity .

Frc,;.: Se ptc,:;ber 1S·7O t0 t·'.J:; 197 1. I se r ved


a tee~;, :

con,ul tant to the Suhc o,rn·,i ttee to EvaluHc th~ :..ct<1arial S<1 undne ss of Soci., ;
Sccu.-i ty System of the 1970 Advisory Counci 1 on Social Security.
From September 1973 to December 1975. I was a senior specialist in the
Con:,1-....-:);; io11,~ 1 r~e:iearch Service cf the Li b1·ary of Couyt·ess.

Howeve r , from

NovemhPr 197.4 until December 1975, I was on loan to the Conrnittee on the Gw'n" t
of the United States House ·of Representatives. Including the period on loan.
I have been the Chief Economist and Assistant Director of the Budget C(l11111i ttel!
from 1974 to the present.
I have been involed with the fonnulation of Federal fiscal po l icy for n:uch
of my career. Correct evaluation of the impact of fiscal policy requires a

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Schedule 0
August 17, 1978

Page 2
Nancy Hays Teeters

detailed knowledge of the workings of monetary policy. I have followed monetary
policy closely, even during the years since I left the Federal Reserve Soard .
I have a thorough understanding of open market operations, and also have extensive
experience in deve 1oping economic forecasts.
I have served three-year tenns as a Director of the American Finance
Association and on the Con-mittee on the Status of liomen of the American Economic
Association . I have also been Vice President, President, Chairman of the
Board, and member of the Board (ex officio) of the National Economists Club .
I am currently a member of the National Advisory Soard of the Institute for
the Study of Educational Policy, Howard University.
If confinned, I shall do my best to serve the Nation wel' as a member of
of the Board of Governors of the Federal Reserve System.

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CoMMIT ID ON Tia lluDolff




JI.C. 205\5

September 12, 1978

_.,,- .

Honorab 1e W1 111 am Proxmire
Chainnan, C00111ittee on Banking, Housing
and Urban Affairs
United States Senate
5300 Dirksen Office Building
Washington, D. C. 20510

Dear Chainnan Proxmire:
Enclosed are the answers to the question s you
d in your
letter of September 11th. If there are any furtherrequeste
question s you
wish answered, it will be 111)' pleasure to do so.
Thank you for your conside ration of this matter.
S1ncere 1y yours ,

~ · ~d
Assista nt Directo r

D1g1t12ed by


I have long been in favor of having the Federal Reserve Board provide economic
projections to the Congress so that we can more easily understand the intended
effects of monetary policy. H-1 by itself is almost meaningless . They have refused
to provide such projections to this or any other conmittee of the Congress.

QUESTION: Given your experience with economic forecasting and the need for
infonnation about monetary policy, especially in preparing budget forecasts, would
you be wi 111 ng to have Federa 1 Reserve forecasts provided to the Congress in conjunction with its required reports on 1110netary policy?
ANSWER: It is my understanding that the Federal Open Market Conmittee (FOHC)
does not make an official concensus forecast of the economy . However, individual
members undoubtedly have opinions on this subject. Since Chainnan Hiller's appointment to the Board, he has been giving his forecast to the various conmittees in open
testimony. I suspect, although I don't know for sure that Chainnan Hiller's forecasts
reflect the concensus of the FOHC as he perceives it. I think it would be wise to
wait and see whether the infonnation now being provided by the Chairman meets the
needs of Congress for additional infonnation.
The declining value of the dollar has been a problem facing the Administration
and the Federal Reserve for a long time. The Federal Reserve has taken steps to
support the dollar from time to time. Raising the discount rate and borrowing from
foreign central banks and then purchasing dollars has a temporary stabilizing
effects. But they don't last long. Such policies do not get at the crux of the
problem. The dollar's weakness is due to fundamental factors -- inflation, large
ofl imports, and faster economic growth in this country than that of our major trading
partners. Last January the Fed raised the discount to support the dollar. Domestic
interest rates rose and stayed up, but the dollar did not recover in value for very
long. Several weeks ago the discount rate was raised again to shore-up the dollar.
There is no guarantee that this will work for very long. Yet interest rates here
have gone up about~ percent.
QUESTION: Given the economic outlook for the economy, current interest rate
levels may cause problems in the future, without really doing much to aid the value
of the dollar in any way. Would you as a fflellber of the Board vote to use domestic
monetary policy to provide quick but temporary support for the dollar?
ANSWER: The use of domestic monetary policy to suport the international value
of the dollar can, as you say, have only a temporary impact on the problems of the
dollar. Whether I would vote to provide such support for the dollar would depend
heavily on the circumstances at the time.
Governor Robertson, the distinguished fonner Vice Chairman of the Federal
Reserve has stated that monetary policy control and bank regulation should not be
combined in a single agency. His view is that bank regulators should not be tempted,
for example, to color their assessment of the quality of a bank's assets by judgments of whether more loans should be made to support an expansionist monetary policy.
Recently the President of First Pennsylvania Bank testified that he personally
experienced a situation where the monetary policy staff of the Fed was encouraging
his bank to make more loans while the Feds bank examiners were cautioning him to
slow down.


byGo~ le

QUESTION: Is there a conflftt of interest between the execution of monetary
policy and bank regulation?
ANSWER: I know very little about the regulatory functions of the Board. I
simply don't know the answer to the question. However, I will, of course, look into
this problem if confirmed.
Senators Ribicoff, Javits and I have sponsored legislation which is under joint
consideration by this C0111111ttee and the Governmental Affairs C011111ittee which would
consolidate the bank regulatory functions of the three separate agencies outside the
Federal Reserve into a single bank regulatory agency.
The extsting bank regulatory structure has been severly criticized as encouraging competition in laxity among the regulators.
QUESTION: Would you favor streamlining the bank regulatory structure along the
lines we propose?
ANSWER: As I have safd, I am not sufficiently knowledgable in this area to have
an informed opinion of this subject.
The Federal Reserve has significant regulatory responsibilities such as the
Acninistration of the bank holding company.

What background do you bring to the Board in supervision and
None, except for general exposure during my years at the Board.

QUESTION: Do you know the amount of time the Board spends on bank regulatory
matters versus monetary policy?


QUESTION: How do you expect to divide your time between monetary policy and
bank regulation?
ANSWER: I don't know, but I assume it would vary depending on economic conditions
and conitions within the banking industry.
Both this Conmittee and the House Banking C011111ittee are considering bills to
improve the conduct of monetary policy and to stem the erosion of Federal Reserve
membership by providing for more uniform and universal reserve requirements . Universal
reserve requirements and access to the Federal Reserve's discount window and to
Federal Reserve services for all banks would be major improvements and would make
the Federal Reserve more of a central bank.

What are your views on this legislation?

ANSWER: I have just learned of this proposed legislation and therefore, I have
not studied it carefully. However, the proposal does seem to correct the problem of
declining membership in the Federal Reserve System.
In July, 1976, the National Urban League and ten other civil rights groups filed
suit against the Federal Reserve and the Comptroller of the Currency, the F .O.1.C .,

PD -1. 5-3

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and the Federal Home Loan Bank Board charging a nearly total failure by these agencies
to enforce the Nation's fair housing laws. Since then, the Comptroller, F.D. I.C . , and
the Bank Board have each settled the suit brought against them by agreeing to
strengthen their enforecement substantially and to devise new methods of detecting
discrimination by lenders.
Unfortunately, only the Fed has steadfastly refused to settle the suit against
it. In fact, it succeeded in having the suit dismissed, but only on procedural grounds,
not on its merits. A recent study of the Board's actions, however , has shown that the
plaintiffs' charges were more than justified.
QUESTION: As a member of the Board, what would your position have been with
regard to this litigation, and what would your attitude be toward the Board's fair
housing activities generally?
ANSWER: I do not know the circllftstances surrounding this suit, so I don't know
what my position would be regarding it. I do feel that the Board should actively
promote fair housing activities.
10. In October, 1977, the five Federal bank regulatory agencies issued proposed
joint. guidelines which would have required lenders who violate the Truth in Lending
Act to refund excess interest charges to consumers . In the ten months which have followed, however, there has been no apparent progress toward finalizing these guidelines.
Statistics compiled by the agencies themselves indicate that interest overcharges under the Truth in Lending Act range anywhere from $30 million to $100 million
annually. But despite knowledge of these overcharges, no refunds are being ordered
and the restitution guidelines are bogged down in bureaucratic quicksand .
QUESTION: As a member of the Board, what would your position be on mandatory
restitution of interest overcharges discovered by Federal Reserve examiners?
ANSWER: Part of the problem of restitution of interest overcharges is apparently
the period of time over which restitution should be made . Overcharges that are discovered currently are obviously easier to repay than overcharges that occurred ten
years ago. I would favor instituting the repayment of current overcharges and work
out, if possible, the ones carried over from the past.


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